Fair Deal to be extended to most Local Government Pension Scheme employers

In Fair Deal 2013, it was made clear that the Fair Deal 2013 did not apply to most local government employers. However, it commented that this issue would be considered separately by the Department for Communities and Local Government. Three years later the Department for Communities and Local Government is now consulting on a set of draft regulations to amend the current LGPS regulations to apply Fair Deal 2013 principles. It is proposed that the Pension Direction (and presumably the equivalent Welsh direction) will be revoked.

The draft regulations propose a new category of “protected transferees” – that is, staff who are participating, or are eligible to participate, in the LGPS and who are compulsorily transferred to an employer that doesn’t offer access to the LGPS. It is proposed that employers who take a compulsory transfer of a protected transferee will be obliged to participate in the LGPS. This will be achieved by requiring the new employer to enter into an admission agreement.

This protection will apply not just to the employees of staff who are employed by local government employers but also to staff employed by admission bodies which could include housing associations and charities. In some cases this will mean that the protection is wider than the protection given by the Pension Direction. In particular, it will mean that staff who transfer out of housing associations and charities will have the benefit of this protection, even if they did not originally transfer out from a local government employer. Interestingly, those who are currently employed in broadly comparable schemes will not be protected.

At a time when housing associations and charities are looking to close access to the Local Government Pension Scheme, it seems anomalous that the government should be extending protection beyond that originally envisaged under the principles of Fair Deal. This could mean that these organisations pay more for services that they contract out than might otherwise be the case.  It may well be the case that this encourages more employers to reconsider their membership of the LGPS.

The consultation is open until 20 August 2016 and a copy can be found here. We plan to submit a response to the consultation and to help us with our submission, we’d like to hear from you. Please do fill in our online survey which can be found here or contact Doug Mullen.